Perspective: Senator becomes truly dumbfounded

David BroderSyndicated Columnist

Published Sunday, June 16, 2002

WASHINGTON -- It is not often that one hears a United States senator confess in public that he was "truly dumbfounded." That was the phrase Connecticut Democrat Christopher Dodd applied to himself the other evening as he contemplated the fact that most of his colleagues were about to open a three-quarters of a trillion dollar hole in the nation's future finances.

I can't improve on Dodd's language. It is truly mind-boggling that majorities in both the House and Senate have voted to compound the budget problems of the nation by making permanent the abolition of what they choose to call the "death tax," more commonly known as the tax on large estates.

Last year, along with a reduction in income tax rates, Congress approved a gradual phase-out of estate taxes, wiping them out for everyone by 2010. But in order to stay within the budget ceilings, they pretended that in the following year, the taxes would revert to their 2001 level.

They didn't mean it. And this year, at the first opportunity, they have sought to make the elimination of "death taxes" permanent.

By margins of 256-to-171 in the House and 54-to-44 in the Senate,

majorities agreed. The only thing that kept the bill from going straight to the White House, where President Bush was eager to sign it, was the Senate's technical requirement under budget rules that it have 60 votes, not just a simple majority. So the budget busters will have to try again.

The estate tax was signed into law by Theodore Roosevelt, who was stunned by the vast fortunes being accumulated in the first decades of the industrial age. Roosevelt had the quaint notion that great inequality of wealth was unhealthy for a democratic society, and -- foolish man -- he even believed that young people were better off making their own way than living off the fruit of their parents' success.

Today's Republicans -- and a few Democratic allies -- think they know better. In a brilliantly orchestrated public relations and lobbying campaign, business groups have convinced lawmakers that it is, as sponsors put it, downright "immoral" to tax a family or business on its earnings each year and tax the heirs again when the original owners die.

Current law acknowledges that point and provides such generous exemptions that fewer than 2 percent of estates pay any tax at all. The Democratic substitute, voted down in both the House and Senate, would have raised the exemption for a married couple to $6 million, leaving only three-tenths of 1 percent of estates subject to taxation.

But that was not enough to satisfy Bush and the Republicans. They want everyone to be able to pass on every nickel of his or her fortune, subjecting those legacies to a capital gains tax only if the heirs decide

to sell off part of the inheritance. That's nothing more than an inducement to keep the fortune within the family.

Some of the super-rich -- the Buffetts and the Gateses, for example -- stepped forward to say they thought their heirs ought to pay taxes. Most of the beneficiaries of this bonanza kept their mouths shut, more than content to let the Republicans claim they are acting on behalf of small businesses and family farms.

When I wrote about this subject a year ago, I heard from some farmers, ranchers and business owners -- including newspaper publishers -- who said they live in fear of their heirs having to sell the property to pay estate taxes. But I also heard from tax planners who say almost every legitimate problem can be anticipated and solved with foresight.

What is different now from a year ago is that the supposed $5.6 trillion surplus over the next decade, which was going to pay for these tax cuts and still allow us to protect Social Security and Medicare, is gone. Instead, we are looking at a deficit this year of around $100 billion and the likelihood that the red ink will rise every year, with the sluggish economy and the added costs of the war on terrorism and homeland defense.

The revenue loss on the phase-out of the estate tax is estimated at almost $100 billion in this decade, but $740 billion in the next decade -- if the abolition is made permanent.

That's the very time when the retiring baby boomers will be turning to Washington, expecting Social Security and Medicare to get them through their remaining years. It will be cold comfort to them if the anti-estate tax forces succeed and the funds for those programs have been depleted by massive tax reductions for the heirs of the wealthiest Americans.